Tourism entrepreneurship
Richard Kisasembe
Assistant Lecturer
Dept. Wildlife Tourism
Entrepreneurship defined
• Entrepreneurship is the process of introducing
ideas and transform those ideas into
marketable products and services with the
aim of earning profit.
• is the process of getting into and operating
one’s own business.
• Entrepreneurship is the ability to create and
build a vision from practically nothing.
What is Entrepreneurship?
1. The Process of
• Initiating a Business Venture,
• Organizing the Necessary Resources,
• Assuming the Associated Financial,
Psychological and Social Risks & Rewards
2. Having the Characteristics of an
Entrepreneur, e.g.
• Brave, innovative, independent, and
achievement oriented
What is an Entrepreneur?
• The term Entrepreneur
• The word entrepreneur is derived from the
French entreprendre, meaning to
undertake.
• An Entrepreneur (ahn’tra pra nur) is a
person who organizes and manages a
business undertaking, assuming the risk
for the sake of profit.
Entrepreneur Cont’d
One who creates a new business
in the face of risk & uncertainty
for the purpose of achieving profit &
growth
by identifying opportunities
and assembling the necessary
resources to capitalize on them.
• An entrepreneur is an individual who
undertakes creation, organization, and
ownership of a business (Meyer and
allen,2000)
• It is also called by various names, e.g.
adventurism, risk taking, innovating, etc.
Who Are Entrepreneurs?
Persons who start and/or operate a
business.
 Individuals who discover market needs
and develop new ideas to meet those
needs.
 Risk takers who provide an impetus for
change, innovation, and progress.
 All active owner-managers (founders

and/or managers of small businesses).
Varieties of Entrepreneurs
•
Founder (“Pure” Entrepreneur)
 A person who brings a new firm into existence.
•
Administrative Entrepreneur
An entrepreneur who oversees the operations of an
ongoing business
•
Franchisee
An entrepreneur whose power is limited by the
contractual relationship with a franchising organization.
•
Entrepreneurial Team
Two or more people who work together as entrepreneurs.
What do entrepreneurs do?
• Entrepreneurs introduce a new product or
service into the market place
• Entrepreneurs discus new resources or new
uses for old resources
• Entrepreneurs develop new technology
• Entrepreneurs open new markets
• Entrepreneurs organize existing enterprises
What does he take?
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Critical and creative thinking
Goal setting
Decision making
Human relations and communication
Management skills and
Problem solving
Why become an entrepreneur?
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Being your own boss
Doing something you enjoy
Having opportunity to be creative
Freedom to set you own
schedule/independence
Controlling your salary
Contributing to the community
Better quality of life
Satisfaction of building something from nothing
Rewards of Being an Entrepreneur
o High degree of independence-freedom from
constraints
o Get to use a variety of skills and talents
o Freedom to make decisions
o Accountable to only yourself
o Opportunity to tackle challenges
o Feeling of achievement and pride
o Potential for greater financial rewards
Entrepreneurial
• Entrepreneurial- means of or having to do
with an entrepreneur (s)
• The entrepreneurial process include five
key components
• The entrepreneur
• The environment
• The opportunity
• Start up resources
• The new venture organization
• The entrepreneur
• is the driving force that recognizes
opportunity, pull together the resources to
exploit the opportunity, and creates a
company to execute that opportunity in the
market place
• The environment
• A new business environment includes all those
variables that affect it that are not controlled
by the entrepreneur e.g skilled labor, taxes,
market
• Start up Resources
• To execute a concept for a new business, an
entrepreneur must use his or her creative
talent to pull together the necessary people
and capital. The start up resources an
entrepreneur needs to start a business
include
i. Capital
ii. Skilled labor
iii. management expertise
iv. a facility
v. equipment,
vi. and most important customer
The opportunity
• Is an idea that have commercial value. An idea
for a new product only has value if there are
customers ready and willingly to buy it.
• An idea + a market equals an opportunity
• The new Venture organization
• Is the shell that surrounds all the products,
processes, and services that are part of the
new business
• In new venture creation there are
• Entrepreneurs: Individuals who establish a
new organization without the benefit of
corporate support.
• Intrapreneurs: New-venture creators working
inside big companies; corporate
entrepreneurs.
Five elements for entrepreneurship to happen…
The environment
1
The organizational
context/ new venture
The entrepreneurial
process
The concept
opportunity
The resources
The
entrepreneur
Dominant Characteristics of
entrepreneurs
1. Persistent. Entrepreneurs are willingly to
work until a job is done, no matter how long
it takes.
2. Creative. Entrepreneurs continually looking
for new ways to solve old problems
3. Responsible. Entrepreneurship do not pass
the buck. They take responsibility for their
decisions and actions
4. Inquisitive. Entrepreneurs want to know as
much as possible about anything that might
affect their venture. The conduct research to
solve problems
5. Goal oriented. Entrepreneurs decide where
they want to go and then set out to get
there
6. Independent. Entrepreneurs want to set their
own and schedules. They want to make
their own decision
7. Self demanding. Entrepreneurs have higher
expectations of themselves
8. Self confident. Entrepreneurs believe in
themselves and act accordingly
9. Risk taking. Entrepreneur like to take risk, but
they are not reckless. They seek opportunity
that offer both challenge and reasonable
chance of success
10.Restless. Once entrepreneurs achieve their
goals, they begin looking for new challenges
11. Action oriented. Entrepreneurs are doers as
opposed to spectators. They make decision
and act on them
Table
2.1
Characteristics Often Attributed to
Entrepreneurs
1.
Confidence
15. Intelligence
29. Pleasant personality
2.
Perseverance, determination
16. Orientation to clear goals
30. Egotism
3.
Energy, diligence
31. Courage
4.
Resourcefulness
17. Positive response to
challenges
5.
Ability to take calculated risks
6.
Dynamism, leadership
7.
Optimism
8.
Need to achieve
9.
Versatility; knowledge of
product, market, machinery,
technology
10. Creativity
11. Ability to influence others
12. Ability to get along well with
people
18. Independence
19. Responsiveness to
suggestions and criticism
20. Time competence, efficiency
21. Ability to make decisions
quickly
32. Imagination
33. Perceptiveness
34. Toleration of ambiguity
35. Aggressiveness
36. Capacity for enjoyment
37. Efficacy
22. Responsibility
38. Commitment
23. Foresight
39. Ability to trust workers
24. Accuracy, thoroughness
40. Sensitivity to others
25. Cooperativeness
41. Honesty, integrity
26. Profit orientation
42. Maturity, balance
13. Initiative
27. Ability to learn from mistakes
14. Flexibility
28. Sense of power
Sources of enterprise ideas on
entrepreneurs
1. PUBLICATIONS:
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These include research based and
popular publications such as:
i. Technical and professional journals.
• These refer to journals that contain
articles dealing with research.
ii. Text books on Entrepreneurship.
• These text books address the operation of
small firms and non profit organizations.
They may have sections devoted to research
on entrepreneurs.
• Books about Entrepreneurship;-These are
written as guides, some deal with problems
facing the individual, who starts a business,
others deal with a specific aspect of the
subject.
iii. Bibliographies of entrepreneurs.
iv. New periodicals.
• Many newspapers or new periodicals run
stories on entrepreneurs either regularly or
periodically.
- Venture periodicals.
- Some new magazines are concerned
specifically with new business venture.
v. News letters-These involve those
newsletters related to entrepreneurship.
vi. Proceedings of conferences.
• These are publications relating to annual or
periodic conferences deals at least in part
with entrepreneurship.
vii. Government Publications.
• A government may publish useful
information on entrepreneurship, small
business operations and specific small
business.
2. DIRECT OBSERVATION:
• This involves observing practicing
entrepreneurs though the use of interviews,
surveys and case studies the activities of
individual entrepreneurs can be related.
• Analysis of these experiences can provide
insights into the traits, characteristic and
personalities of individual entrepreneurs and
discovers commonalties that help explain the
perspective.
3. SPEECH AND PRESENTATION:
• These involve speeches by practicing
entrepreneurs.
• This source provides an opportunity to learn
about the entrepreneur perspective.
RISKS FACED BY ENTREPRENEURS( dark side
of entrepreneurship
• Starting or buying a new business
involves risk and the higher the rewards,
the greater the risk entrepreneurs usually
face.
• Entrepreneurs face a number of risks that
can be grouped into four basic areas:
1. Financial risks:
• In most new ventures, individual
resources will be lost if venture fails.
• Many people are unwilling to risk their
savings, house property and salary to
start a new business.
2. Career Risk:
• A question frequently raised by would be
entrepreneurs are whether they will be able
to find a job or go back to their old job if their
venture should fail.
• This is a concern to managers who have a
secure organizational job with a high salary
and a good benefit package.
3. Family and social risk:
• Starting a new venture uses much of
entrepreneurs’ energy and time.
• Consequently his or her other commitment
may suffer e.g. old friends may vanish slowly
because of missed get together.
• 4. Psychic Risk:
• The greatest risk may be to the well being of
the entrepreneur. They can be replaced a new
house can be built; spouse, children and
friends can usually adopt.
• But some entrepreneurs who have suffered
financial catastrophes have been severely
affected psychologically.
The ten deadly mistakes of
entrepreneurship
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Management mistake
Lack of experience
Poor financial control
Weak marketing efforts
Failure to develop a strategic plan
Uncontrolled growth
Poor location
Improper inventory
Incorrect pricing
Inability to make the “entreneurial transaction”
Creativity and Innovation
• Creative as a prerequisite to innovation
• Creativity - is “the ability to bring something new
into existence or Process of generating new ideas
Where as
• Innovation - is the process of doing new thing or
Process of generating and applying new ideas.
Or
• Innovation - is the transformation of creative ideas
into useful applications by combining resources in
new or unusual ways to provide value to society
for or improved products, technology, or services.
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Entrepreneurship and small business
• Entrepreneurship is elusive term
• It is commonly linked lo small business
management because it involves the process
of recognizing opportunities and development
of new ventures, but entrepreneur operate in
a range of context including larger
corporations and the public sector, not just
small businesses (Stokes and Wilson,2006)
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Small business
• It is generally much easier to identify a small
business when you see one than to define it,
although sometimes even identifying the
small business entity may not be easy at all.
• Some businesses such as shoeshine
businesses would most probably be identified
as being small by all observed.
• Likewise, other businesses undertakings, such
as Pepsi-Cola Company, would perhaps be
identified as being big by every one.
• But how would most people likely classify
business entities that lie between these two
extremes?
• At best, the classifications between the two
extremes would largely depend upon the
different and biased perceptions of
individuals.
What is a small business?
• Is the one which is independently owned and
operated and not dominant in its field
• A “small business’ is conceived of as any business
undertaking that meets all the following
conditions or characteristics and describe the
domain of small business; they include:
• (i) Ownership:
• Independently owned and managed by an
individual entrepreneur, or a small group of
entrepreneurs or family members.
• (ii) Dominance:
• Relatively small in its field of operation when
compared to other business entities in the
field.
• (iii) Capital:
• Capital is supplied by and ownership is held by
an individual or a few individuals.
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(iv) Area of operation:
• Operated in a definite location or local
community, but with no restriction regarding
the extent of its market; ie.
• The area of operation is primarily local
although the market isn’t necessarily local.
• Taken together, these characteristics provide a
qualitative description of small business.
• However, it is important to consider both the
qualitative definitions and the qualitative
factors when trying of define small business.
• Economically a small firm has a relatively small
share of the market.
- Managerially, it is administered by its owners
or part owners in a personalized way, rather
than by means of a formalized management
structure.
- Financially, it is independent in the sense that
it does not form part of a larger enterprise and
owner-managers are free from outside control
in taking their principal decisions (Bolton
Committee, UK)
• However, these are no proper parameters’ by
which one can precisely define small business
enterprise, much depends on the nature of
the industry in which they operate and
personalities who ran the businesses.
Small Business vs. Entrepreneurial Venture
• Small business- a business having fewer than
100 employees, independently owned and
operated, not dominant in its field, and not
characterized by many innovative practices.
• Entrepreneurial venture- A new business
having growth and high profitability as
primary objectives
• In Tanzania small businesses are divided into
two categories:
• Formal sectors;
• Informal sectors.
What is the Tanzanian Definition?
• It is apparent that a small firm in the UK
and/or USA might not be small as in Tanzania,
or alternatively a large firm in Tanzania might
not be large in the above countries.
Tanzanian Definition of SMEs
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Characteristics of small business
1. Small size:
• The size of these businesses is small in terms
of capital and number of employees.
2. They are independently managed:
• Managed by owners, family members,
relatives or other employees but they don’t
have formalized management structure.
3. They are independently owned:
• They are owned by the owner manager. They
do not form part of a large enterprise and the
owner managers are free from outside control
in making dye decisions.
4. Employ few workers:
• - Less than 50 workers
• - Less than 10 workers for micro-enterprises.
5. Localized operation:
• - Operations of the business are localized with
workers and owners living in one home
community although markets need not to be
local.
6. Small market share
• The relative size of the business within its
industry is small.
7. Presence of an entrepreneurial - spirit
• It involves innovation, initiative and risk
taking.
Role Of Tourism Enterprises In Socio
Economic Development
1. Employment creation/Job creation to:
• Retrenched people from privatized parastatal
organizations.
• Retired civil servants.
• Primary/Secondary schools leavers.
• Graduates from universities and colleges.
• Skilled, semiskilled and unskilled workers.
2. Increased national income:
• tourism firms increase GNP and per capital
income and hence improves the standard of
living. This is due to the fact that the capital
required is relative low and turnover is very
high.
3. Generate wealth and spread prosperity:
• Creation of new business creates wealth,
which is eventually distributed to all members
in various forms. Business owners, suppliers,
financiers, distributors and other interested
parties are all beneficiaries to the wealth
created.
4. Encourage grass root development:
• There has been a notion that those who form
tourism businesses are likely to coming from
local people resources. It encourage people to
restore their cultural values.
• 5. It is the source of foreign:
• currency and contributes to improvement of
balance of payments of the country.
6. Creation of health competition:
• Tourism firms compete against other similar
sector hence increase efficiency and improve
quality of goods and services.
7. Revenue to the government:
• They broaden the tax base; and employees of
tourism business pay tax to the government.
8. Utilization of local available resource:
• Tourism entrepreneur use locally available
resources thus they are easy to be established
and they reduce both financial and
technological dependencies.
• They extract resources that would otherwise
not be exploited.
9. Provide auxiliary products and services to
other firms: They provide inputs to other
firms.
10. Avenues for independent innovation:
• Tourism entrepreneurship business/firms
provide avenues for potential owners and
innovators who wish to developed new
products or new services from new ideas. E.g.
they encourage innovation.
11. Creation of balanced economic
development:
• Some Tourism enterprises need relative small
capital and operate in rural, semi-rural and
urban areas.
• They create employment in rural areas, and
prevent rural urban migration.
• They contribute to balanced development in
both rural and urban areas.
13 Provision of goods and services:
• They provide variety of goods and service
direct to consumers.
Problems of Small Business in Tanzania:
• Although the Tanzania government has been
encouraging its people to engage in tourism
businesses, those who respond to government’s
call encounter the following problems:
1. Inefficiency bureaucracy and regulatory
environment
• Business registration and reporting environment
has led most of the tourism businesses to operate
in informal sector. Long procedures for business
registration.
• High tax rates.
• Corruption in many areas of public services.
• High registration costs.
2. Inadequate financial services for small
business sector:
• Lack of access to finance.
• Government has been priotizing achievement
of macro economic policies such controlling
inflation, paying debts; etc.
• Lack of wide coverage by commercial banks.
• Commercial banks give priority to large
firms/business.
Weak financial infrastructure:
• This includes the following:
• Weak financial market
• Weak financial institutions.
3. Poor physical and business support
infrastructure:
. Poor telecommunication infrastructure, road,
airlines services, railways, ports, warehousing
and international trade services.
. Poor infrastructure present barriers to market
entry and growth of small businesses.
4. Lack of government business support
services:
• Due to privatization policy organization such
as SIDO has been loosing their autonomy.
• Most tourism business owners cannot afford
to pay the cost of consultancy.
• Inadequate business advisory services.
5 Lack of skilled staff ( lack of training);
• Poorly trained or untrained personnel.
• Lack of management skills.
6. Inadequate quality control:
• The quality of the products is low to compete
with the low cost imports.
7. Poor management:
• Lack of management skills in key departments
such as Accounting, Finance, Inventory
management, Procurement, marketing and other
endogenous functional areas cause business
failure.
8. Under-capitalization:
• Lack of sufficient initial capital make it difficult to
start small business.
• Low operating capital due to poverty.
• Excessive drawing reduces capital.
9. Inaccessibility to market intelligence:
• Lack of marketing information in terms of
market size, customers behaviours, product
preferences competitive strength and
weaknesses lead to inadequate sales and
business failure.
10. Serial and historical traditions:
• Gender inequality leads to poor participation
of women to business activities.
• Lack of ownership right for women make their
participation in small business to be very low.
11. Inadequate government policy to support
entrepreneur :
• - Taxes are too high.
• - Education curriculum does not put emphasis
on entrepreneurship.
12. Lack of access to modern technology due to
lack of funds.
• Questions:
• Discuss the Role of tourism enterprises
Tanzania.
• Describe the main problems which limit the
growth of small businesses in Tanzania.
• Discuss the solutions to the problems facing
small businesses in Tanzania.
Drawbacks of Small Business Ownership
 Uncertainty of income
 Risk of losing entire investment
 Long hours and hard work
 Lower quality of life until the business gets
established
 High levels of stress
 Complete responsibility
 Discouragement
Benefits of Small Business Ownership
The opportunity to:
create your own destiny
make a difference
reach your full potential
reap unlimited profits
contribute to society and be recognized for
your efforts
do what you enjoy and have fun at it
Field or scope of small business:
• There are many fields of small business from which any
given prospective entrepreneur may select a business
activity.
• They are as follows:
• Retailing,
• Services,
• Agriculture,
• Manufacturing,
• Construction,
• Wholesaling; and
• Mining etc.
SERVICES
• Essentially, service businesses are those
establishments, which provide intangible products to
their customers
• Among the most common business activities which
may be classified as services include the following:
• Tourism
• Taxi and minibus operations/Transportation.
• Automobile, radio, watch, television, shoe and bicycle
repairing
• Tailoring
• Hair dressing in beauty salons/
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Shoe shining.
Photography
Security services
Car washing
Home refurbishment
Customer care
Accommodation
Consultation
Tour guiding
Teaching
The Tourism Industry a glance at…
 Means millions of people moving from the
countries they live and work to another
country, or countries
 The Third Largest Industry all over the world
after Petroleum and Electronic,
 Producing 935 million international visitors
(2010), and
 $ 852 Billion (US) Revenues (2009), and
 The largest and fastest growing services
industry
Tourism Industry
– On the Demand side
• Tourists’ motivations and behaviors - traveling people
– On the Supply side
• Sectors that satisfy tourist needs and supplying products tourism businesses and products
– Infrastructure
• Components that an area’s residents rely on, such as
airports, highways, harbors that serve visitors
– Superstructure
• Facilities built to accommodate tourist needs, hotels,
restaurants, theme parks, casinos etc.
Tourism Today
• Tourism today is a regular, organized and
promising industry having a flow of human
control.
• The entire gamut of trade and trade activities
seen to have combined adventure with
element of tourism there by offering exciting
opportunity for entrepreneurs
Opportunity
• To add value, all these components must be
addressed
• A comprehensive development in terms of
having all these services providers is a
prerequisite to development of tourism
• Conversely as tourism grows at a destination
there will be demand for these services
• This in turn is an opportunity for
entrepreneurs
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Tourism Product
• Narrow sense
Consists of what the tourist buys (Mostly goods
and services)
• Wider sense
Combination of what the tourist does at the
destination and services used (package)
Tourism product cont’d
• A product is anything that can be offered to a
market for attention, acquisition, use or
consumption that might satisfy a want or
need. Includes physical objects, services,
places, organizations, and ideas
• A service is any act or performance that one
party can offer to another that is essentially
intangible and does not result in the
ownership of anything. Tied or not to good
Characteristics of tourism
• Tourism Services have four attributes that
typically distinguish them from goods:
Higher intangibility
Greater perishability
Inseparability of service from the service
provider
Greater heterogeneity (variability) in quality
IDEAS
unconventional Tourism-related business
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Photographic safaris
Walking Trails
Bird watching tours
Ranch, farms, cattle
Post lodgings
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Film industry
Curio and craft factories
Visit to tradition healers-medicine
Game park/reserves/farms
Parachuting
Desert 4 x 4 trals4-wheeles
Gathering products and tracking
Hot air ballooning
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Desert/bush survival course
Hunting safaris
Snake /reptile parks/ butterfly farms
Botanical gardens
Museums
etc
Subsidiary or secondary activities
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Filling station/convenience stopovers
Supply of fire woods to camps/lodge/hotels
Waste collection
Thatching service
Supply of natural minerals
Bottling and supply of spring and natural
water
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Supply of tradition food items
Supply of decoration and ornamental plants
Horticulture
Landscaping
Training and HRD
Tourism and wildlife consultancy
Doing Business in Tourism Industry
 Tourism and travel Industry has the
reputation of being a relatively clean and
pleasant industry in which to invest
 Requires relatively low start up capital
 Setting up in the industry is often seen as
simple and requiring few skills other than the
off-claimed ability to get along with people
Doing Business in Tourism Industry
It is therefore attractive to those leaving from other
jobs and investments or do not enjoy them, to buy into
a bar, guest house or travel business for example.
 Provides opportunities for those who would like to use
individual skills in a beautiful environment. i.e., a chef may
happily work in pleasant resort and a tour guide/travel
agent use his/her talents in the related field
 Provides new business opportunities, such as event
management
Legal forms of entrepreneurial
organizations
Types of business ownership
• SOLE PROPRIETORSHIP
• A business that is owned and operated by one
person
• The owner is responsible for all operations of
the business and assumes all the risk.
• It is the easiest and most popular form of
business ownership
The owner of a sole proprietorship:
• receives the profits,
• incurs any losses, and
• is liable for the debts of the business.
• In a sole proprietorship the owner must
decide how much liability protection he or
she needs.
• liability protection
insurance against the debts and actions of a
business
Advantages
• Sole proprietorship is easy and inexpensive to
create.
• The owner has complete authority over all
business activities.
• It is the least regulated form of business
ownership.
• The business pays no taxes; income is taxed at
the personal rate of the owner.
Disadvantages
• The owner has unlimited liability.
• Raising capital is more difficult.
• The business is totally reliant on the skills and
abilities of the owner.
• Owner has responsibility for all debts
• Costs and time commitment can be high
• Owner is responsible for all aspects of the
business
• Owner doesn’t have fringe benefits
Partnership
• Is a form of business organization in which
two or more people own and operate the
business together
• owners share decisions, assets, liabilities, and
profits
• A partnership draws on the skills, knowledge,
and financial resources of more than one
person.
Types of partnership
• 1. General Partnerships
• All partners have unlimited liability.
• A participant in a partnership who has
unlimited personal liability and takes full
responsibility for managing the business
• The law requires that all partnerships have at
least one general partner.
• limited partner
• a partner in a business whose liability is
limited to his or her investment; a limited
partner cannot be actively involved in
managing the business
• Some partners have personal liability that is
limited to the cash or property they invested
in the firm.
Advantages
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Partnerships are inexpensive to create.
General partners have complete control.
Partners can share ideas.
Partners can secure investment capital more
easily and in greater amounts.
• Relatively easy to form
• They share business losses
• They share time commitment
Disadvantages
• It is difficult to dissolve one partner’s interest
without dissolving the partnership.
• There may be personality conflicts.
• Partners can be held liable for each others’
actions.
• Partnerships are more difficult to close down
than sole
What is a Corporation?
•a business that is registered by a state and
operates apart from its owners; it issues shares
of stock and lives on after the owners have sold
their interest or passed away
In a corporation, the owners of the business
are protected from liability for the actions of the
company.
“An artificial being, invisible, intangible, and
existing only in contemplation of the law.”
Advantages of a corporation
• The owners are shareholders.
• They have limited liability for the debts of the
corporation and share the profits
• Usually shareholders do not operate the
company – they hire employees to do so
• Corporations can usually raise funds more
easily than sole proprietors or partners
Advantages of a corporation
• Corporations usually have a lower tax rate
than private owners
• A corporation can continue to exist after the
death of its owners
Disadvantages of a corporation :
• Corporations have more complicated
structures than sole proprietorships or
partnerships
• Employees who are not owners may not be
committed to the business
• The value of company shares can change
depending on changes in the stock market
Types of Corporations
• Closely Held (Private) Corporation
• Publicly Held (Public) Corporation
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S Corporation
Limited Liability Corporation (LLC)
Professional Corporation
Multinational or Transnational Corporation
Source of finance
1. Debt Source/Financing
• Secured financing of a new venture that involves
a payback of the funds plus a fee (interest for the
use of the money) e.g Banks, Trade credit,
Finance Companies
2. Equity sources/financing
• Money invested in the venture with no legal
obligation for entrepreneurs to repay the
principal amount or pay interest on it
• Other equity financing sources
• Personal saving, Friends and family, Private
investors, Partners , Venture capitalists ,Statesponsored venture capital funds
Marketing
Definition and concept
• Marketing is a management process
responsible for identifying, anticipating and
satisfying customers requirement profitably.
• Or marketing refers to setting right product, at
right price ,to the right people, at right place,
using right promotional tools at right time
• Market is a physical place where buyers and
sellers gather to buy and sell goods and
services
Marketing analyis
Defining areas of analysis
• If a business is to succeed and make a profit ,
it must satisfy its customers.
• Every business starts with this marketing
concept
• However , you cannot satisfy your customers (
potential customers) if you don’t know who
they are and what they want
• To find out you conduct market analysis
• A thorough market analysis requires that you
examine the market from two entirely
different perspective
• On the one hand, you will need to identify
your prospective customers and determine
their buying behaviors
• On the other hand you will need to analyze
your field endeavor, or industry, and rate your
prospects for success within it
Target market and customer
•
This involve selection of target market and
customer/segmentation
1. Market Segmentation- getting the detail you
need breaking down the total market into
groups of buyers with similar needs and
interest. These are called segments.
• Consumer –are usually segmented on the
following bases
1. Geographics - region, state, country, and city
2. Demographics- age, gender, family size,
family life circle, income, occupation,
education, religion, race, nationality, and/or
social class
3. Psychographics-personality, opinions, and
life style elements, including activities and
interests
4. Buying behavior- knowledge, personal
experience
2. Target marketing
• After all the segments within your range of
consideration have been identified, you are
ready to select your target market.
• This is the specific market you are going to
serve/ concentrate
• Within this segment you will find you first
customer
•
For example suppose your target market for
your pizza is students. That is a broad
category that need to be segmented into
more manageable
• Here are the guideline to use in segmenting
your market.
i. The market segment should be measurable.
• If you have no idea how many potential
buyers there are in the market, you cannot
know if it is worth pursuing.
ii. The segment should be large enough to be
potentially profitable
• You will have to spend money to market
your product. The segment you selected
must be big enough to enable you to
recover your costs and make a profit
iii. The segment should be reachable
• First you must be able to reach potential
customers with words. You must be able to
get information about your product and its
availability to interested buyers in the
segment
•
Second, you must be able to reach potential
customers physically.
• You must be able to deliver your product to
their homes or business or to the places
where they shop
iv. The market segment should be responsive
• You should have some indication from your
research that people in the segment would,
in fact, be interested in your product and
willingly to buy it
• It is possible for a business to select and serve
multiple market segment, but that doesn’t
usually happen in the start up stage
Marketing plan
• This is done after completing marketing
analysis and identifying your target market,
you are ready to take the next step in planning
your business
• You must define your marketing objectives
• Most business objectives relate to sales,
market share, growth, and profit
• Marketing plan divided into two
i. Long term
ii. Short term
Marketing plan consists of seven strategies
•
i.
ii.
iii.
iv.
v.
vi.
vii.
Traditional 4Ps extended to 7Ps to
encompass growth of service industry
Product
Place,
Price and
Promotion
People
Process
Physical Environment
The Marketing Mix
Price
Product
Promotion
•
•
•
•
•
Advertisement
Direct marketing
Sales promotion
Personal selling
Publicity/public relation
Place
People
Process
Process
• How do people consume services?
• What processes do they have to go through to
acquire the services?
• Where do they find the availability
of the service?
–
–
–
–
–
–
Contact
Reminders
Registration
Subscription
Form filling
Degree of technology
Physical Environment
Physical Environment
( internal layout such as appropriate décor, furniture,
and furnishing) and (intangible factors such as the
ambience, or atmosphere)
–
–
–
–
–
–
–
Smart/shabby?
Trendy/retro/modern/old fashioned?
Light/dark/bright/subdued?
Romantic/chic/loud?
Clean/dirty/unkempt/neat?
Music?
Smell?
The Business Plan
• It is a detailed analysis and description of all
aspects of a business over a given time frame.
-Owners goals, history, market (s),
products, strategies, management,
organisation, operations, projections
• Is a document that describes a new
business
Kisasembe Richard
Tourism entrepreneurship
BENEFITS/PURPOSES OF THE BUSINESS PLAN
1. Primary purpose of a business plan is to help
entrepreneurs gain a deeper understanding
of the opportunity they envision. It enables
you to look at the business concept in an
objective manner and can be strong reality
check
2. Helps focus ideas and serves as a feasibility
study of the business's chances for the
success and growth
Kisasembe Richard
Tourism entrepreneurship
3. It is a map/framework to be followed by
management. It assist you in planning and
managing the business and prepares your
success.
4. It is a strong communication tools. It defines
your purposes, your competitors, your
management and personnel
5. The finished business plan provides the basis
for your financial proposal , while seeking
financing from banks
Kisasembe Richard
Tourism entrepreneurship
6. A business plan will help you cope with
change because while you are writing your
plan you become a student of the business
7. Regular review of the plan continues to
educate you about past decisions and
planning so you can move quickly to make
changes
8.To explain the business to other companies
with which it would be useful to create an
alliance or contract
Kisasembe Richard
Tourism entrepreneurship
9. To attract employees
10. To convince oneself that the new venture is
worthwhile before making a significant
financial and personal commitment
11. B/P can help an entrepreneur to allocate
resources appropriately, handle unexpected
problems, and make good business decisions
12. Be prepared for readers who do not have
time to read the whole plan
Kisasembe Richard
Tourism entrepreneurship
Who need a business plan and when
• Who ?
1. Start-ups – the typical business plan is an
entrepreneur seeking funds to start a new
business/ new venture
2. Established firms - existing companies write
business plans to secure additional
financing, engage distributors or partners ,
or seek support for new initiatives
Kisasembe Richard
Tourism entrepreneurship
When?
• Starting a new venture ( organization, product
or services)
• Seeking financing from financial institution
• Expanding an existing organization, product or
service
• Buying an existing organization, product or
service
Kisasembe Richard
Tourism entrepreneurship
STEPS IN DEVELOPING A BUSINESS PLAN
• The steps below will give you a good idea of
what is involved in putting together a business
plan.
• The timetable for developing the plan will
depend on the complexity of the situation and
your own time schedule.
Kisasembe Richard
Tourism entrepreneurship
Idea is a fun thing it does not
work unless you do it
144
1. Make commitment to go into business or
develop your existing business for yourself.
2. Analyze your strengths and weaknesses,
paying special attention to your business
experience, business education and desires.
Then answer this question:
• Why should I be in business for myself?
Kisasembe Richard
Tourism entrepreneurship
3. Choose the product or service that best fits your
strengths and desires.
Then answer these questions:
– What need will my product or service fill?
– What is unique about my product or service? How do
I know it is unique?
– What will my product or service do for customers?
– What will it not do?
– What should it do later that it does not do now ?
Kisasembe Richard
Tourism entrepreneurship
4. Research the market for your product or
service to find answers to such questions as
these:
• Who are my customers?
• Where are they?
• What is their average income?
• How do they buy?
• At what price?
Kisasembe Richard
Tourism entrepreneurship
• In what quantities?
• When do they buy?
• When will they use my product or service?
Where will they use it?
• Why will they buy it?
• Who are my competitors?
• Where are they?
Kisasembe Richard
Tourism entrepreneurship
5. Forecast your share of market, if possible.
• Then forecast your sales revenues over a 3year period, broken down as follows:
.First year – monthly, Second year – quarterly,
Third year – yearly
• Next, answer this question:
• Why do I believe my sales revenue forecast is
realistic?
Kisasembe Richard
Tourism entrepreneurship
6. Choose a site for your business; then answer
this question:
• Why do I prefer this site to other possible
sites?
Kisasembe Richard
Tourism entrepreneurship
7. This step applies only to entrepreneurs who plan to
go into manufacturing.
• Develop your production plan, answering these
questions:
• How big should my plant be?
• How should my production process be laid out?
• What equipment will I need?
• In what size?
• How will I control the waste, quality and inventory of
my product?
Kisasembe Richard
Tourism entrepreneurship
8. Develop your marketing plan, answering such
questions as these:
• How am I going to create customers?
• At what price?
• By what kinds of advertising and sales promotion?
• Through personal selling? How?
Kisasembe Richard
Tourism entrepreneurship
9. Develop your organizational plan, answering
this question:
– What kinds of skills and talents will I need to
make my business grow?
• Draw up an organization chart that spells
out who does what, whom have what
authority and who reports to whom.
Kisasembe Richard
Tourism entrepreneurship
10. Develop your legal plan, focusing on
whether to form a sole proprietorship, a
partnership, or a corporation, and then
explain your choice.
11. Develop your accounting plan, explaining
Kisasembe Richard
Tourism entrepreneurship
12. Develop your insurance plan, answering this
question:
– What kinds of insurance will I need to
protect my venture against possible loss
from unforeseen events?
13. Develop a computer plan, spelling out the
ways those computer services may help you
plan and control your business.
Kisasembe Richard
Tourism entrepreneurship
• 14. Develop your financial plan by preparing these
statements:
– A 3-year cash budget. Show how much cash you
will need before opening for business and how
much cash you expect will flow in and out of
your business, broken down as follows:
– First year – monthly
– Second year – quarterly
– Third year – yearly
– An income statement for the first year only.
Kisasembe Richard
Tourism entrepreneurship
– Balance sheets for the beginning and end of
the first year.
– A profit graph (breakeven chart), showing
when you will begin to make a profit. Then
determine how you will finance your
business and where you expect to raise
money.
15. Write a cover letter summarizing your
business plan, stressing its purpose and its
promise.
Kisasembe Richard
Tourism entrepreneurship
Components of business plan
1. Introductory elements
• Cover page
• Executive summary-it appears in the first
chapter of the business plan. It should be
short, summaries current state of the
business, objectives, implementation,
marketing and selling aspects, financial
requirement, and profit expected
• Table of contents
Kisasembe Richard
Tourism entrepreneurship
2.
Business/company description
• General description of the business
• Industry analysis/industry background
• Description of the company vision, mission
statement, objectives and value
• Uniqueness of the product or
services/Description of your products and
services
• Company positioning
Kisasembe Richard
Tourism entrepreneurship
3. Production plan/service development
•
•
•
•
•
Production and operation process
Cost of products/service development
Labor requirement
Expenses and capital requirements
Costs of goods
Kisasembe Richard
Tourism entrepreneurship
4. Marketing
A. Market/ research and analysis
• Target market( customer) identified
• Marketing size and trends
• Competition
• Estimated market share
Kisasembe Richard
Tourism entrepreneurship
B. Marketing plan
• SWOT analysis
• Marketing strategy
–Estimated Sales
–Distribution
–Pricing
–Advertising and promotion
Kisasembe Richard
Tourism entrepreneurship
5. Operations
A. identify location
Advantages
Zoning
Taxes
B. Proximity to supplies
C. Access to transportation
Kisasembe Richard
Tourism entrepreneurship
6. Management and organization
• Management team-key personnel
• Legal structure-stock agreement, employment
agreement, ownership
• Board of directors, advisors, consultants
• Support services
Kisasembe Richard
Tourism entrepreneurship
7. Financial plan
A. Funding requirements
B. Financial forecast
– Income Statements
– Cash Flow Statements
– Balance Sheet
– Breakeven Analysis
– Budgeting plan
Kisasembe Richard
Tourism entrepreneurship
Customer care services
What is customer care
• Customer service-is anything we do for the
customer that enhance the customer
experience
• Customers have varying ideas of what they
expect from the customer interaction
• The customer service provider must get to
know his or her customer and strive to
provide them with excellent customer service.
Five needs of every customer
1. Service-customer expect the service that
they think is appropriate for the level of
purchase that they are making.
2. Price-the costs of everything we purchase is
becoming more and more important
3. Quality-customer want the products they
purchase to be functional to what he expect
4. Action- customer need action when a
problem or question arises
5. Appreciation-customer need to know that
we appreciate their request e.g saying
thanks
Benefit of customer care
• Statistics shows that it is times cheaper to
retain a customer than it is to obtain a new
one, and that if you upset a customer, they tell
at least 12 other people about it. That’s why in
today's fiercely competitive environment,
customer service will be the key to survival in
the 21 cent.
• Dissatisfied customers tell an average of 12
other people about it.
1. Increase sales
• Good news travel fast an organization that has
a good reputation and is recommendation by
existing customers to other people will find
the number of its customers increasing.
• This means more people will spend more
money in the products and services of the
organization.
3. An edge over the competition
• By providing excellent customer service-better
than that of your competitions you will give
your organization more chance of maintaining
existing customer and also attracting a new
one.
4. More customers through repeat business and
recommendation
• Good customer service can lead to repeat
business, that existing customer coming back
for more. In fact they will continue to return,
they will te4nd to build loyalty to an
organization.
Ten commandment of customer care
1. Our customer- are the most important
people in our business
2. Our customer-are not dependent on us, we
depend on them
3. Our customer- like to be welcomed and
recognized, listened to, smiled at, cared for,
thanked and invited back
4. Our customers- are not people to argue with
or match wits with
6. Our customers- are not cold statistic but
human beings with feelings and emotion like
our own
7. Our customers- want value for money and
enjoyment, quality products served correctly
and promptly in relaxed and welcoming
surroundings
8. Our customer- give us an opportunity to
serve them
9. Our customer- are deserving of our most
courteous and attentive treatment
10. Our customer- are the lifeblood of our
business and have paid for our service
Before Starting up,
ASK YOURSELF! - 1
Is Entrepreneurship For You?
• There is no way to eliminate all the risks associated with
starting a small business.
• However, you can improve your chances of success with
good planning and preparation.
• A good starting place is to evaluate your strengths and
weaknesses as the owner and manager of a small business.
Carefully consider each of the following questions.
1. Can you start alone?
• It will be up to you - not someone else telling you to
develop projects, organize your time and follow through on
details.
Before Starting up,
ASK YOURSELF! - 2
2. How well do you get along with different personalities?
Business owners need to develop working relationships
with a variety of people including customers, vendors,
staff, bankers and professionals such as lawyers,
accountants or consultants. Can you deal with a
demanding client, an unreliable vendor or cranky staff
person in the best interest of your business?
3. How good are you at making decisions?
Small business owners are required to make
decisions constantly, often quickly, under pressure,
and independently.
Before Starting up,
ASK YOURSELF! - 3
4. Do you have the physical and emotional stamina (power) to
•
•
•
run a business?
Business ownership can be challenging, fun and exciting.
But it's also a lot of work.
Can you face 12 hour work days 6 or 7 days a week?
5. How well do you plan and organize?
• Research indicates that many business failures could have
been avoided through better planning.
• Good organization of financials, inventory, schedules,
production can help avoid many pitfalls.
Before Starting up,
ASK YOURSELF! - 4
6. Is your drive strong enough to maintain your
motivation?
• Running a business can wear you down.
• Some business owners feel burned out by having
to carry all the responsibility on their shoulders.
• Strong motivation can make the business succeed
and will help you survive slowdowns as well as
periods of burnout.
Before Starting up,
ASK YOURSELF! - 5
7. How will the business affect your family?
• The first few years of business startup can be hard
on family life.
• The strain of an unsupportive spouse may be hard
to balance against the demands of starting a
business.
• There also may be financial difficulties until the
business becomes profitable, which could take
months or years.
• You may have to adjust to a lower standard of living
or put family assets at risk.
Before Starting up,
Motivate YOURSELF!
It's true, there are a lot of reasons not to start your own business.
But for the right person, the advantages of business ownership
far outweigh the risks.
• You get to be your own boss.
• Hard work and long hours directly benefit you, rather
than increasing profits for someone else.
• Earning and growth potential are far less limited.
• A new venture is exciting.
• Running a business will provide endless variety,
challenge and opportunities to learn.